CHICAGO, Dec 5 (Reuters) - Cyberonics Inc. (CYBX.O: Quote, Profile, Research) on Wednesday said it agreed to pay plaintiffs $650,000 to settle claims that it issued stock options to executives improperly, which led to accounting errors.

The medical device maker said in a filing that the memorandum of understanding, which still needs final court approval, recognizes liability of $650,000 as of Oct. 26, 2007 and that it expects to recover that amount through its insurance.

There was no admission of liability and all claims in the lawsuit will be dismissed with prejudice, meaning that they cannot be refiled.

The company also reported its quarterly loss narrowed to $4.1 million, or or 15 cents per share, in the period ended Oct. 26, 2007, compared with a year-ago loss of $12.5 million, or 49 cents per share. (Reporting by Debra Sherman; Editing by Derek Caney)

Boy, this doesn't sound good at all. So, Cyberonics is settling this out of court, to prevent any further publicity. That is probably the reason why they are paying the cost out of court. It would be worse for them if they went to court, and more money for them to pay. I was once involved in a lawsuit. And this happened to me. The lawsuit was done out of court, thank God. Sincerely,Bonnie